Letter to the Budget Committee on Economic Growth

February 25, 2013

Dear Senator:

On behalf of the more than three million members of the National Education Association we wish to offer the following views in connection with the February 26 hearing, “The Impact of Federal Investments on People, Communities, and Long-Term Economic Growth.”

In the 19th century, America moved from an agricultural to an industrial economy. In the 20th century, we moved from an industrial to a service economy. Now, we are moving to a new information and knowledge economy. And in this new economy, investing in human capital is the most important investment we can make.

Dollar for dollar, investing in public education has a greater net positive impact on economic growth than any other type of investment, including tax cuts. Everyone’s income grows when we invest in public education. Moreover, lower and middle incomes grow even more than upper incomes, positively impacting businesses’ bottom line because lower-income people spend their new income on consumer goods and services. For example:

The real rate of return on investments in education and training programs—in terms of payoff to lifetime earnings relative to the upfront costs—is a whopping 5 to 15 percent per year. (Jason Bendor, Jason Bordoff and Joshua Furman. “An Education Strategy to Promote Opportunity, Prosperity, and Growth,” The Brookings Institution, 2007)

Increasing education investment by $1 per $1,000 of personal income yields a $26 short-run and a $319 long-run increase in personal income. A 10 percent increase in school-quality investment yields a 10 percent increase in home values. (Source: Tom Hungerford and Robert Wassmer, Levy Economics Institute/California State University, “K-12 Education in the U.S. Economy and Its Impact on Economic Development, Earnings, and Housing Values,” 2004)

Even more striking, investments in universal high-quality pre-kindergarten can carry eventual benefit-to-cost ratios as high as 8-to-1. (Source: Robert G. Lynch, “Enriching Children, Enriching the Nation: Public Investment in High-Quality Prekindergarten,” Economic Policy Institute, 2007)

Increases in educational attainment in the United States labor force from 1915-99 directly resulted in at least 23 percent of the overall growth in productivity, or around 10 percent of growth in gross domestic product. (“What’s the Return on Education,” Anna Bernasek, The New York Times, December 11, 2005)

For additional examples of the cost-effectiveness of the federal investment in education, please see the attached document, “Education and the Economy: Quick Facts.”

In light of these facts, the looming across-the-board cuts in the federal investment in education are clearly counterproductive. Nationwide, the cuts would negatively impact the education of 7.4 million students and could cost nearly 50,000 educators their jobs, further weakening the overall economy at a time Congress should be focused on helping to create jobs. Education funding would be rolled back to pre-2004 levels even though our schools are now serving nearly 6 million more students.

Despite the havoc already wrought by ill-advised budget cuts, some are calling for even deeper cuts to the programs ordinary Americans depend on: education, Medicaid, Social Security, and Medicare. Instead, as a matter of basic fairness, Congress should ensure that the wealthiest among us and corporations pay their fair share. If you do well in America, you ought to do right by America.

Many large companies pay zero federal income taxes. And our inequitable tax code allows wealthy households to disproportionately benefit from deductions and other tax benefits—the top one percent of taxpayers receives nearly 25 percent of the benefit from these provisions. The amount of U.S. taxes avoided indefinitely by shifting U.S. profits to foreign tax havens for just 10 companies represents the entire discretionary budget of the U.S. Department of Education. For details, see the attached document, “Deferral of Offshore Profits.”

Investing in education is investing in the future of America. The federal government should be increasing its investment in education, not cutting it. For the sake of our nation’s future, we urge Congress to replace the looming across-the-board cuts with a balanced approach that requires America’s wealthiest citizens and largest corporations to pay their fair share of taxes.

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